CORPORATIONS

Definition - Corporation is an artificial being created by operation of law,

having the right of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence.

Kinds of persons:
1. Natural persons - human beings.
2. Juridical or artificial persons - (not a natural person) a corporation is an
artificial person created by law.

A corporation is distinct and separate from the persons composing it. When a
corporation is sued, it does not include the corporators because the
corporation is a separate person from that of the corporators or members.

Corporation distinguished from partnership:

1. Corporation is created by operation of law. Partnership is created by
agreement of the parties.
2. Corporation is formed by 5 to a maximum of 15 incorporators. Partnership
is formed by 2 or more people.
3. Corporation acts thru a Board of Directors. Partnership acts through general
partners.
4. In a corporation, the stockholders are not liable for the obligations of the
corporation. In a partnership, the general partners are liable with their
separate assets for the partnership debts.

Kinds of corporations:
1. Stock corporation - One with capital stocks divided into shares and is
authorized to issue dividends or profits. Those who compose a stock
corporation are called stockholders or corporators.
2. Non-stock corporation - No part of the income is distributable as dividends
to members or officers. In a non-stock corporation, there are no stockholders
(as the name suggests), only members.
3. Domestic corporation - One incorporated under Philippine laws.
4. Foreign corporation- One formed under any laws other than those of the
Philippines and whose laws allow Filipino citizens and corporations to do
business in their own country.
5. Public corporation - organized as part of the State, like local government
units, example provincial and municipal governments.
6. Private corporation - created for private business, like Jolibee, McDonald.
7. Ecclesisastical corporation - created for religious purposes, like INC,
Roman Catholic.
8. Lay corporation - non religious.
Components of a corporation:
1. Corporators - stockholders (for stock-corporation) or members (for non-
stock corporation).
2. Incorporators - persons who originally formed/organized the corporation.
3. Stockholders - the corporators of a stock corporation.
4. Members - the corporators of a non-stock corporation.

Articles of Incorporation - basic governing document of a corporation. Before

starting a corporation, the articles are submitted, with the application, to the
Securities and Exchange Commission. The Articles contain the names of the
incorporators, purposes of the corporation, term of existence, amount of
authorized capital stock, and all other important Information about the
corporation.

Capital - refers to actual property of the corporation, in money or property.

Capital stock - the amount specified in the Articles of Incorporation paid in or

procured to be paid in.

Board of Directors/Trustees
1. This is the governing body of the corporation.
2. The term of office of directors is one year.
3. They are elected at an annual meeting called for the purpose.

Powers of a corporation:
1. Express - Those that are clearly stated and defined in the articles and by-
laws.
Example: election of Directors every year.
2. Implied - Those are not expressly stated, but are inferred from the powers
expressly stated.
Example: Acts to protect property as hiring of security guards.
3. Incidental - Powers that are exercised because of the very nature of the
corporation.
Example: having a corporate name.

By-Laws are rules of action of a corporation.

How does one become a stockholder?

1. By subscription of unissued shares
2. By purchase of treasury shares
3. By transfer (sale, barter, donation, etc.) from a shareholder.

Rights of a stockholder:
1. Vote
 2. Receive dividends
3. Inspect corporation books
4. Right to a stock certificate
5. Enter into voting trust, etc.

Dissolution of corporation is the termination of the existence of the

corporation.

Kinds:
1. Voluntary - by decision of the corporation.
2. Involuntary - could be caused by: end of the term, because of failure to
organize, by order of the SEC, legislative dissolution.

Winding Up/Down - liquidation of liabilities and assets of the corporation and

eventual closure of business.